Macro Mcgraw Hill Midterm

The french term laissez-faire means

"let it be"

the accompanying table gives price and output data over a five year period for an economy that produces only one good. If year 2 is the base year, the price index for year 3 is a) 120 b) 125 d) 133 d) 150

((basket/ base year)x 100) d) 133

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. What is the slope of the budget line if the quantity of apples were measured on the horizontal axis and bananas on the vertical axis.

(pirice of x/ price of y) answer: -2

if potential gdp is 330 billion and there is a positive gdp gap of 30 billion, actual gdp is

360 billion

GDP tends to a) overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives b) understate economic welfare because it includes expenditures undertaken to offset or correct pollution c) understate economic welfare because it does not take into account increases in leisure d) overstate economic welfare because it does not reflect improvements in product quality

c) understate economic welfare because it does not take into account increases in leisure

Only three goods are produced in an economy in the following amounts: A=10, B=30, C=5. The current year per-unit prices of these three goods are A=$2, B=$3, and C=$1. If the per-unit prices of the three goods were each $1 in a base year used to construct a GDP price index, then the real gdp in the current year is a)110 b)115 c)45 d)160

c)45

the GDP gap measures the amount by which a)nominal gdp exceeds real gdp b)actual gdp exceeds equilibrium gdp c)potential gdp exceeds actual gdp d)actual gdp exceeds national income

c)potential gdp exceeds actual gdp

refer to the diagram (Supply is positive, demand is negative line... C is above interception of lines, B is interception of lines, A is below interception). An effective government-set price floor is best illustrated by a) price A b) quantity E c) price C d) price B

c. price C

refer to the diagram (price is on y axis and quantity on x axis, the graph looks like an x). An effective government-set price ceiling is best illustrated by a) price A (below where the lines intercept) b) quanity E c) price C (above where lines intercept) d) price B (where lines intercept)

a) price A (below where the lines intercept)

the downward stickiness of wages serves like a ____ in the labor market a) price floor b) price ceiling c) demand determinant d) supply determinant

a) price floor

a fundamental difference between the command system and laissez-faire capitalism is that, in the command systems a) the division of output is decided by central planning rather than by individuals operating freely through markets b) all economic decisions are made by the government, whereas there is no government in laissez-faire capitalism c) scarcity does not exist, whereas it does in laissez-faire capitalism d) money is not used, whereas it is in laissez-faire capitalism

a) the division of output is decided by central planning rather than by individuals operating freely through markets

GDP excludes a) the market value of unpaid work in the home b) the production of services c) the production of nondurable goods d) positive changes in inventories

a) the market value of unpaid work in the home

the graph shows the market for tickets to a "Final Four" sports event. Assume that there is only one kind of ticket to the event. The supply curve in this event-ticket is vertical because a) the organizers are selling a fixed number of tickets b) the organizers are charging a fixed price for the tickets c) there are a fixed number of buyers in the market d) the government has regulated the selling of the tickets

a) the organizers are selling a fixed number of tickets

the service a homeowner performs when she mows her yard is not included in gdp because a) this is a nonmarket transaction b) this is a nonproduction activity c) this is a noninvestment transaction d) muilitple counting would be involved

a) this is a nonmarket transaction

a large underground economy results in an a) understated GDP b) overstated GDP c) understated GDP price index d) overstated GDP price index

a) understated GDP

the marginal cost curve is a) upsloping because of increasing marginal opportunity costs b) upsloping because successive units of a specific product yield less and less extra utility c) downsloping because of increasing marginal opportunity costs d) downsloping because successive units of a specific product yield less and less utility

a) upsloping because of increasing marginal opportunity costs

economic systems differ according to which two main characteristics? a) who owns the factors of production and the methods used to coordinate economic activity b) the technology used in production and the quantity and quality of natural resources c) how goods are produced and who get them d) the political system in place and the degree of scarcity facing the economy

a) who owns the factors of production and the methods used to coordinate economic activity

refer to the accompanying data, using year 1 as the base year. All dollars are in billions. Real GDP increased from year 3 to year 4 by approximately a)68 billion b)75 billion c)98 billion d)215 billion

a)68 billion

enterprise managers and workers in the soviet union often resisted innovations in production methods because a)production targets were often increased when innovations occurred b) there was a chronic shortage of computers c) workers could not be reallocated geographically d) innovations ordinarily increased dependence on world markets

a)production targets were often increased when innovations occurred

suppose that an economy is producing on its production possibilities curve but it is not producing quantities of each good where the marginal benefit equals the marginal cost for each good. This economy a) should not change its production because it cannot improve its allocation by shifting resources b) can improve its allocation by lowering the unemployment rate c) can improve its allocation by producing more of one good and less of the other d) can improve its allocation by producing more of both goods

c) can improve its allocation by producing more of one good and less of the other

command systems are also known as a) market systems b) pure capitalism d) laissez-faire capitalism c) communism

c) communism

if unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the a) frictional unemployment rate is 5 percent b) cyclical unemployment rate and the frictional unemployment rate together are 5 percent c) cyclical unemployment rate is 4 percent d) natural rate of unemployment will eventually increase

c) cyclical unemployment rate is 4 percent (NRU is cyclical and structural)

inflation caused by an increase in total spending is referred to as a) cost push inflation b) anticipated inflation c) demand pull inflation d) hyperinflation

c) demand pull inflation

in markets where the supply curve is vertical, changes in a) demand will not cause the equilibrium price to change b) supply will not cause the equilibrium price to change c) demand will not cause the equilibrium quantity to change d) supply will not cause the equilibrium quantity to change

c) demand will not cause the equilibrium quantity to change (Equilibrium quantity- quantity of goods which equilibrium price happens... equilibrium price is Price where quantity demanded equals quantity supplied)

GDP estimates account for which of the following items? a) do it yourself activates b) psychic income people derive from their work c) household spending for mechanics and hair stylists d) improvements in product quality

c) household spending for mechanics and hair stylists

gordan sells narcotics on the street. this type of illegal activity a) would be considered double counting in calculating GDP b) is estimated and included in GDP figures c) is excluded from GDP figures d) causes GDP to be overstated

c) is excluded from GDP figures

in Year 1, the price level was 120 and the average nominal income was $30,000. In Year 2, the price lvel was 125 and the average nominal level of income was $32000. what happened to the real income from year 1 to year 2 a) it fell by $400 b) it rose by $400 c) it rose by $600 d) it rose by $2000

c) it rose by $600

the presence of discouraged workers a) increases the size of the labor force but does not affect the unemployment rate b) reduces the size of the labor force but does not affects the unemployment rate c) may cause the official unemployment rate to understate the true amount of unemployment d) may cause the official unemployment rate to overstate the true unemployment

c) may cause the official unemployment rate to understate the true amount of unemployment

alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is a) unemployed b) employed c) not in labor force d) in the labor force

c) not in labor force

suppose there are 10 million part time workers and 90 million full time workers in an economy. five million of the part-time workers switch to full-time work. As a result a) official unemployment rate will fall b) official unemployment rate will rise c) official unemployment rate will remain unchanged d) the size of the labor force will increase

c) official unemployment rate will remain unchanged

an effective price ceiling will a) induce new firms to enter the industry b) result in a product surplus c) result in a product shortage d) clear the market

c) result in a product shortage (Price ceiling Set below equilibrium price....equilibrium price is Price where quantity demanded equals quantity supplied)

the natural rate of unemployment is a) higher than the full-employment rate of unemployment b)lower than the full employment rate of unemployment c) that rate of unemployment occurring when the economy is at its potential output d) found by dividing total unemployment by the size of the labor force

c) that rate of unemployment occurring when the economy is at its potential output

an effective government set price ceiling is best illustrated (on graph) above or below interception point (graph is an X)

below

refer to the accompanying data. the gross domestic product for this economy is a) $100 b) $95 c) $110 d) $107

c) $110

Refer to the accompanying national income data (in billions of dollars). In these data, U.S. GDP is a) $315 billion b) $324 billion c) $305 billion d) $367 billion

c) $305 billion

if actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is a) $360 billion b) $660 billion c) $320 billion d) $20 billion

c) $320 billion

Refer to the accompanying data (all figures in billions of dollars) (theres a photo). Disposable income is a) $83 b) $73 c) $75 d) $77

c) $75

a nations capital stock was valued at $300 billion at the start of the year and $350 billion at the end. Consumption of fixed capital in the year was $25 billion. Assuming stable prices, gross investment was a) $25 billion b) $50 billion c) $75 billion d) $90 billion

c) $75 billion

consider the supply and demand curve's depicted in the diagram above (picture in photos). If the government imposes a price ceiling of $15 then sellers will be willing to sell _____, and a black market could develop where the price would be _______. a) 24 units; below $15 b) 36 units; above $15 c) 24 units; above $15 d) 36 units; below $15

c) 24 units; above $15

(photo of problem) Refer to the accompanying data. The gross domestic product is a) 326 b) 282 c) 307 d) 300

c) 307

if the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's law indicates that the GDP gap is a) 2 percent b) 3 percent c) 4 percent d) 6 percent

c) 4 percent

The full-employment rate for the United States economy is now generally considered to be a) 2 percent of the labor force b) 6 percent of the labor force c) 4 to 5 percent of the labor force d) 8 to 9 percent of the labor force

c) 4 to 5 percent of the labor force

a large negative GDP gap implies a) an excess of imports over exports b) a low rate of unemployment c) a high rate of unemployment d) a sharply rising price level

c) a high rate of unemployment

refer to the table. Suppose that demand is represented by columns 3 and 2 (negative line) and supply is represented by columns 3 and 5 (positive line). if the price were artificially set at $6 (below interception of lines) a) the market would clear b) a surplus of 40 units would occur c) a shortage of 40 units would occur d) demand would change from columns 3 and 2 to columns 3 and 1

c) a shortage of 40 units would occur (refer to photos for problem)

suppose that a fully employed economy produces only two goods, hamburgers and flat-panel tvs. if the economy is currently producing more than the optimal quantity of hamburgers, then to attain the optimal allocation of resources, it should: produce __________ tvs and _________ hamburgers

produce MORE tvs and FEWER hamburgers

economic systems differ from one another based on who owns the factors of production and

how economic activities are coordinated and directed

macroeconmics is the part of economics concerned with individual units, such as a person, a household, a firm, or an industry." This statement is a) positive but incorrect b) positive but correct c) normative but incorrect d)normative and correct

a) positive but incorrect

core inflation refers to the inflation picture after stripping away the a) capital goods prices b) food and energy prices c) government regulated prices d)service-sector prices

b) food and energy prices

an unexpected increase in total spending will cause an increase in GDP a) if prices are sticky b) is prices are fully flexible c) regardless of whether prices are sticky or fully flexible d) only if prices are stuck in the long term

a) if prices are sticky

unanticipated inflation tends to harm a) people who save money in financial institutions b) individuals who borrow money from financial institutions c) businesses which borrow money from financial institutions d) governments that have a progressive personal income tax

a) people who save money in financial institutions

the coordination problem in the centrally planned economies refers to the idea that a) planners had to direct required inputs to each enterprise b) the price level and level of employment were inversely related c) the immediate effect of more investment was less consumption d) exports had to be equal to imports for a central plan to work

a) planners had to direct required inputs to each enterprise (centrally planned economy- a central authority, such as a government, makes economic decisions regarding the manufacturing and the distribution of products)

if actual gdp is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is a) $510 billion b) $490 billion c) $10 billion d) $990 billion

a) $510 billion

refer to the accompanying national income data (photo) disposable income is a) 611 billion b) 659 billion c) 667 billion d) 686 billion

a) 611 billion

cyclical unemployment results from a) a deficiency of spending on goods and services b) the decreasing relative importance of goods and the increasing relative importance of services in the US economy c)everyday dynamics of a free labor market, with workers voluntarily changing jobs. d) technological change

a) a deficiency of spending on goods and services

suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would a) decline b) increase c) increase in the short run but eventually decline d) be unchanged

a) decline

okun law indicates that for a) every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated b)every 1 percent that the actual unemployment rate exceeds the natral unemployment rate, a 5 percent gdp gap is generated c) a 5 percent gdp gap, a 1 percent increase in the natural unemployment rate is generated d) a 2 percent gdp gap, a 2 percent increase in the actual unemploment rate is generated

a) every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated

for a given amount of nominal income, the real income will a) fall if the price level rises b) fall if the price level falls c) be unaffected if the price level falls d) rise as the price level rises

a) fall if the price level rises

the graph below shows the market for tickets to a "final Four" sports event. Assume that there is only one kind of ticket to the event (demand and supply lines intercept at the price $40... supply lines is veritical) a scalpers market will exist if the event organizers set the official ticket price at a) $50 b) $20 c) $40 d) $60

b) $20

if the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real income would be about a) $18, 857 b) $25,143 c) $44,000 d) $77,000

b) $25,143

if potential GDP is $400 billion and there is a negative GDP gap of $15 billion, actual GDP is a) $415 billion b) $385 billion c) $15 billion d) $785 billion

b) $385 billion

refer to the accompanying national income data (photo). Personal income is a) $621 billion b) $656 billion c) $705 billion d) $716 billion

b) $656 billion

refer to the given information about a hypothetical economy (photo). The unemployment rate is a) 18.8 % b) 12.5 % c) 16.7% d) 25 %

b) 12.5%

the economy has an annual inflation rate of 3.5 percent. it will take approximately how many years for the price level to double? a) 10 b) 20 c) 25 d) 30

b) 20

Only three goods are produced in an economy in the following amounts: A=10, B=30, C=5. The current year per-unit prices of these three goods are A=$2, B=$3, and C=$1. If the per-unit prices of the three goods were each $1 in a base year used to construct a GDP price index, then the GDP price index in the current year is a) 205.5 b) 255.5 c) 39.3 d) 100

b) 255.5

Answer this question based on the given information for an economy in some year. I. dollar value of resource extraction activity= $20 billion II. Dollar value of production activity= $50 billion III. Dollar value of distribution activity= $80 billion IV. Dollar value of final output= $110 billion Gross output for this economy equals a) 110 billion b) 260 billion c) 150 billion d) an amount cannot be calculate with the information given

b) 260 billion

the value of transactions in the underground economy is estimated to be what percentage of GDP in the UNited States a) 2 percent b) 7 percent c) 19 percent d) 25 percent

b) 7 percent

assume the natural rate of unemployment in the us economy is 5 percent and the actual rate of unemployment is 9 percent. Accoring to OKUN's law, the negative gdp gap as a percentage of potential gdp is a) 4 percent b) 8 percent c) 10 percent d) 2 percent

b) 8 percent

the aggregate cost of unemployment can be measured by the a) amount by which actual gdp exceeds potential gdp b) amount by which potential gdp exceeds actual gdp c) excess of real gdp over nominal gdp d) excess of nominal gdp over real gdp

b) amount by which potential gdp exceeds actual gdp

Most economists agree that the immediate cause of most business cycle variation is a) an unexpected change in the productivity of workers b) an unexpected change in the level of total spending c) the invention of new products d)the growth and subsequent bursting of financial bubbles

b) an unexpected change in the level of total spending

which of the following is a distinguishing feature of a command system? a) private ownership of all capital b) central planning c) heavy reliance on markets d) widespread dispersion of economic power

b) central planning

when a recession begins and unemployment begins to rise, the demand for goods and services will fall. if the decline in demand is precipitous, which of the following will occur? a) hyperinflation b) deflation c) rising interest rates d) rising inflation

b) deflation

Answer this question based on the given information for an economy in some year. i. dollar value of resource extraction activity = $20 billion ii. dollar value of production activity = $50 billion iii. dollar value of distribution activity = $80 billion iv. dollar value of final output = 110 billion Suppose that next year the dollar calue of distribution activity fell to $70 billion, but the other values remained the same. based on this, we could conclude that from year 1 to year 2, a) GO and GDP both fell by 10 billion b) GO fell by 10 billion, while gdp was unchanged c) gdp fell by 10 billion, while GO was unchanged d) neither GO nor GDP were affected by the change in distribution activity

b) go fell by 10 billion, while gdp was unchanged

refer to the diagram. A government price support program to aid farmers is best illustrated by a) quantity E b) price C (above interception point) c) price A (below interception point) d) price B (at interception point)

b) price C (above interception point)

which of the following statements is true about price ceilings? a) price ceilings create surpluses for goods but shortages for services b) price ceilings cause goods to be rationed by some other means than legally determined market prices c) ration coupons are the only way to ration goods when price ceilings are in place d) all of above

b) price ceilings cause goods to be rationed by some other means than legally determined market prices

which of the following will not produce an outward shift of the production possibilities curve? a)upgrading the quality of a nation's human resources b) reducing unemployment c) increasing the quantity of a societies labor force d)improving a societies technological knowledge

b) reducing unemployment

an effective price floor will a) force some firms in this industry to go out of business b) result in a product surplus c) result in a product shortage d) clear the market

b) result in a product surplus

Gross output (GO) a) and GDP are equivalent measures of the final output of an economy b) sums together the dollar value of economic activity at every stage of production c) measures all economic activity leading up to but excluding final output d) always equals an amount smaller than GDP

b) sums together the dollar value of economic activity at every stage of production

a typical concave (bowed out from origin) production possibilities curve implies a) that economic resources are unlimited b) that society must choose among various attainable combination of goods c) decreasing opportunity costs d) that society is using a market system to allocate resources

b) that society must choose among various attainable combination of goods

which of the following activities is excluded from GDP, causing GDP to understate a nations "well-being" a) the services of used-car dealers b) the child care services provided by stay at home parents c) the construction of new houses d) government expenditures on military equipment

b) the child care services provided by stay at home parents

as it relates to an economic growth, the term long-run trend refers to a)the long run increase in the relative importance of durable goods in the us economy b) the longterm expansion or contraction of business activity that occurs over many years c) fluctuations in business activity that averahe 40 months in duration d) fluctuatuion in business activity that occur around Christmas, Easter, and other major holidays

b) the longterm expansion or contraction of business activity that occurs over many years

a worker would be hurt the least by inflation when the a) worker anticipates inflation and increases savings at the bank b) worker is protected by the cost-of-living adjustment clause in an employment contract c) worker is protected by fixed annual increases in waged and benefits in an employment contract d) government increases the level of social security retirement benefits to correct for the effects of anticipated inflation

b) worker is protected by the cost-of-living adjustment clause in an employment contract

a persons real income will increase by 3 percent if her nominal income a)increases by 5 percent while the price index falls by 2 percent b)increases by 5 percent while the price index rises by 2 percent c)increase by 2 percent while the price index rises by 5 percent d)increases by 2 percent while the price index falls by 5 percent

b)increases by 5 percent while the price index rises by 2 percent

economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. This statement is a)positive but incorrect b)positive and correct c)nomative but incorrect d)normative and correct

b)positive and correct

the production of durable goods varies more than the production of nondurable goods because a) purchases of durable goods are not postponable b)purchases of durable goods are postponable c)the producers of nondurable goods have monopoly power d)producers of durable goods are highly competitve

b)purchases of durable goods are postponable

refer to the accompanying national income data (in billions of dollars). National income is a) $804 billion b) $940 billion c) $975 billion d) $1,019 billion

d) $1,019 billion

refer to the accompanying national income statistics. personal income is a) 483 billion b) 376 billion c) 372 billion d) 317 billion

d) 317 billion

the marginal benefit curve is a) upsloping because of increasing marginal opportunity costs b) upsloping because successive units of a specific product yield less and less extra benefit c) downsloping because of increasing marginal opportunity costs d) downsloping because sucessive units of a specifc product yield less and less extra benefit

d) downsloping because sucessive units of a specifc product yield less and less extra benefit

price floors and ceiling prices both a) cause shortage b) cause surpluses c) cause the supply and demand curves to shift until equilibrium is established d) interfere with the rationing function of prices

d) interfere with the rationing function of prices

the government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems? a) laissez-faire economy b) pure capitalism d) mixed-market economy c) macroeconomic systems

d) mixed-market economy

if an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that a) it is impossible to produce more consumer goods b)resources cannot be reallocated between the two goods c) it is impossible to produce more capital goods d) more consumer goods can be only produced at the cost of fewer capital goods

d) more consumer goods can be only produced at the cost of fewer capital goods

full employment rate of unemployment is also called the a) potential rate of unemployment b) cyclical rate of unemployment c) frictional rate of unemployment d) natural rate on unemployment

d) natural rate on unemployment

full employment refers to the situation when there is a) 100 percent employment of the labor force b) 0 percent unemployment rate c) no frictional or structural unemployment d) no cyclical unemployment

d) no cyclical unemployment

environmental pollution is accounted for in a) GDP b) PI c) DI d) none of these

d) none of these

if real disposable income fell during a particular year, we can conclude that a) personal taxes increased b) inflation occured c) transfer payments declined d) none of these necessarily occured

d) none of these necessarily occured

gross output (GO) and GDP both measure a) resource extraction b) production c) distribution d) output of an economy

d) output of an economy

laissez-faire capitalism limits the government economic function to the following except a) protecting private property rights b) establishing a legal environment to enforce contracts among individuals c) preventing individuals and firms from coercing others d) setting prices of individuals goods and services

d) setting prices of individuals goods and services

the underground economy is mostly made up of a) unpaid work b) illegal activities c) do it yourself activities d) tax evasion activities

d) tax evasion activities

the unemployment rate of a) women greatly exceeds that of men b) whites is roughly equal to that of African Americans c) managerial and professional workers exceeds that of construction and extraction workers d) teenagers is much higher than that of adults

d) teenagers is much higher than that of adults

if personal income exceeds national income in a particular year, we can conclude that a) transfer payments exceed the sum of social security contributions, corporate income taxes, and taxes on production and imports b) the sum of social security contributions, corporate income taxes, and undistributed corporate profits exceeded transfer payments c) consumption of fixed capital and taxes on production and imports exceeded personal taxes d) transfer payments exceeded the sum of social security contributions, corporate income taxes, and undistributed corporate profits

d) transfer payments exceeded the sum of social security contributions, corporate income taxes, and undistributed corporate profits

Consumers in an economy buy only three general types of products, A, B, and C. Changes in the prices of these items are over a period are shown in the table. using year 1 as the base year, the countrys price index in year 2 is a) 100 b) 103.9 c) 105.2 d) 106.3

d)106.3